Elizabeth McCormick – Washington Energy Reporthttps://www.troutmansandersenergyreport.com
Tue, 18 Dec 2018 18:02:22 +0000en-UShourly1https://wordpress.org/?v=4.9.9https://washingtonenergyreportredesign.lexblogplatform.com/wp-content/uploads/sites/456/2017/08/cropped-cropped-favicon-1-32x32.pngElizabeth McCormick – Washington Energy Reporthttps://www.troutmansandersenergyreport.com
3232FERC Releases Oroville Spillway After Action Reporthttps://www.troutmansandersenergyreport.com/2018/12/ferc-releases-oroville-spillway-action-report/
Tue, 18 Dec 2018 15:57:50 +0000https://www.troutmansandersenergyreport.com/?p=10440On November 23, 2018, the FERC After Action Panel (“FAAP”) issued a report (“FAAP Report”) providing an evaluation of the causes and recommendations to FERC after a spillway failure that took place at the Oroville Dam in February 2017. According to the FAAP Report, issues with the Oroville Dam spillways have been ongoing since the project was commissioned in 1967, and there are shortcomings related to the implementation of FERC’s Part 12 dam safety regulations. In light of its assessment, the FAAP provided FERC with recommendations for improvement of the Part 12 program.

In February 2017, the Oroville Dam located in Northern California experienced sudden and severe erosion damage to the main service and emergency spillways of the dam, which resulted in the evacuation of 180,000 residents downstream. After the spillway failure, FERC convened the FAAP to review project documents and history for the Oroville Dam. Such documents were to include design, construction, consultant, and inspection reports and other reports by the state of California. In addition, FERC directed the FAAP to evaluate the implementation of FERC’s dam safety program at the Oroville Dam, including: the dam owner requirements under Part 12 of FERC’s regulations (which govern the safety of water power projects and project works); the Potential Failure Modes Analysis (“PFMA”) process; the Instrumentation and Monitoring Program; and Owners Dam Safety Program (“ODSP”). FERC asked that the FAAP focus on both the main and emergency spillways and to review failure mechanisms if possible. FERC stated that the California Department of Water Resources’ Independent Forensic Team (“IFT”) would report their findings to the FAAP for its review. If the FAAP found any shortcomings, FERC directed the FAAP to provide recommendations for improvement or changes to the FERC dam safety program to ensure the avoidance of future incidents. On January 5, 2018, the IFT issued a comprehensive report to the FAAP which covered all the main design, construction, inspection, operation, and maintenance activities that may have contributed to the spillway failure (“IFT Report”).

In its November 23 report to FERC, the FAAP first provided comments on the IFT Report related to the causes of the spillway failures and found that the IFT Report did not include a physical explanation for the “root cause” of the spillway failure. In the FAAP’s view, the failure was caused by the unanticipated, slow progressive erosion of the foundation materials used in the construction of the spillway. Second, the FAAP reviewed the effectiveness of dam safety activities, including FERC’s Annual Inspections, the 5-year Part 12 process Safety Inspection Reports, the PFMA sessions from 2004 to 2014, and the ODSP. Lastly, the FAAP Report highlighted several shortcomings in the implementation of FERC’s Part 12 dam safety regulations. According to the FAAP Report, dam safety programs have been implemented with a greater emphasis on satisfying the administrative tasks and with a lesser focus on the analysis, maintenance, and evaluation of current data and documentation.

Consequently, the FAAP recommended a revamp of FERC’s Part 12 program, starting with the establishment of a Dam Safety Engineering Review Board (“DSERB”). The DSERB would be comprised of a variety of experts in several fields who serve for a period of 5-10 years. The DSERB would review a small number of high hazard dams as selected annually by FERC and provide Part 12 reports to FERC. Based on the Part 12 reports, FERC would then develop recommendations and direct dam owners to attend a review meeting with FERC and the DSERB to review the Part 12 reports and conclusions. In addition, the FAAP recommended that FERC issue a set of priority topics to its regional offices to be addressed in all Part 12 reviews. Finally, the FAAP recommended that, in addition to the Part 12 reports, FERC should identify the highest dams and spillways and assign a team of FERC engineers to conduct FERC annual inspections.

]]>Bernard McNamee Seated as FERC Commissionerhttps://www.troutmansandersenergyreport.com/2018/12/bernard-mcnamee-seated-ferc-commissioner/
Wed, 12 Dec 2018 22:18:13 +0000https://www.troutmansandersenergyreport.com/?p=10427On December 6, 2018, the United States Senate confirmed Bernard L. McNamee as a FERC Commissioner. President Donald Trump nominated McNamee to fill the vacancy left by Commissioner Robert Powelson following Powelson’s August 2018 resignation from FERC to become president and CEO of the National Association of Water Companies (see October 9, 2018 edition of the WER). McNamee was sworn in on December 11, 2018, returning FERC to its full five-member complement.

McNamee will serve the remainder of Powelson’s term at FERC, which expires on June 30, 2020. In a statement, FERC Chairman Neil Chatterjee congratulated McNamee on his confirmation and noted he looks forward to working with McNamee on the important matters before the Commission.

]]>States Chime in During D.C. Circuit Review of FERC Pipeline Permitting Policyhttps://www.troutmansandersenergyreport.com/2018/12/10418/
Wed, 12 Dec 2018 21:37:58 +0000https://www.troutmansandersenergyreport.com/?p=10418On December 3, 2018, several states filed an amicus brief urging the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) to vacate an order issued by FERC that announced a shift in policy limiting the Commission’s review of greenhouse gas impacts during pipeline permitting.

In 2016, FERC approved a proposed pipeline project in upstate New York that would increase capacity to flow Marcellus Shale gas into the northeastern markets, finding that the project would not significantly affect the environment. A request for rehearing was filed arguing, among other things, that FERC failed to evaluate the upstream and downstream impacts of the pipeline project as required by the National Environmental Policy Act (“NEPA”).

FERC denied that request for rehearing (see May 29, 2018 edition of the WER) and signaled that it would no longer evaluate or consider upstream and downstream greenhouse gas emissions caused by the natural gas infrastructure projects it reviews. Although FERC conceded that it had considered such effects for a short time, the order explained that doing so went beyond NEPA’s requirements because the upstream and downstream greenhouse emissions were too uncertain to warrant review. Petitioners appealed, claiming that FERC is refusing to undertake the very type of evaluation of project emissions that it has been ordered to do by the D.C. Circuit in Sierra Club v. FERC (see October 2, 2017 edition of the WER).

The attorneys general for several states lent their support to petitioners with an amicus brief. In the amicus brief, New York, Maryland, New Jersey, Oregon, Washington, Massachusetts and the District of Columbia (collectively, “amici States”) argue that FERC’s order has both substantive and procedural deficiencies that require it to be vacated. Substantively, the amici States contend that the project’s upstream and downstream greenhouse gas emissions are not too uncertain to warrant NEPA review, as FERC had argued, and that FERC should have requested more information from the applicants rather than determine there was insufficient evidence in the record. Procedurally, the amici States claim that FERC has abused its discretion to set new policy during an adjudication, because it will stymie public participation in a separate FERC proceeding underway that will address this issue.

This case has not yet been scheduled for oral argument. A copy of the amicus brief is available here.

]]>FERC Declines to Require New CAISO Capacity Markethttps://www.troutmansandersenergyreport.com/2018/12/ferc-declines-require-new-caiso-capacity-market/
Tue, 04 Dec 2018 22:11:52 +0000https://www.troutmansandersenergyreport.com/?p=10413On November 19, 2018, FERC denied a complaint filed by CXA La Paloma, LLC (“La Paloma”) requesting that FERC use its jurisdiction over resource adequacy to direct the California Independent System Operator Corp. (“CAISO”) to implement centralized capacity procurement. FERC found that La Paloma failed to meet its burden to demonstrate that CAISO’s tariff was unjust, unreasonable, or unduly discriminatory or preferential under section 206 of the Federal Power Act.

In its complaint, La Paloma argued that California’s current resource adequacy regime increasingly requires participants to provide capacity from existing (often non-renewable) resources, such as the La Paloma gas-fired generating facility, and receive capacity payments that are four to seven times lower than those received by new (renewable) resources, resulting in a revenue shortfall. La Paloma argued that CAISO’s capacity market effectively functions based on a vertical demand curve, which it claimed leads to highly volatile capacity payments and may lead to other market inefficiencies. Previously, in 2016, CAISO denied a request to approve an economic outage for the underlying generating facility, a decision that was later upheld by FERC. According to the La Paloma complaint, such decisions, coupled with the very low capacity payments for existing resources, demonstrate market failures in CAISO that could eventually lead to reliability issues in California.

In response, CAISO argued that granting the complaint would threaten to undo CAISO’s existing bilateral procurement framework for capacity and force changes more in line with the eastern RTO/ISOs. As noted in FERC’s order, PJM Interconnection, L.L.C., New York Independent System Operator, Inc., and ISO New England Inc. have all recently transitioned from a vertical demand curve to a sloped demand curve for capacity.

Ultimately, FERC rejected La Paloma’s arguments for multiple reasons. FERC reiterated that suppliers in a competitive wholesale market are not guaranteed full cost recovery, but simply the opportunity to recover their costs. FERC also noted that La Paloma’s complaint focused mainly on low capacity prices that were attributed to California’s capacity surplus and that low prices do not in and of themselves demonstrate market failure. Similarly, FERC reasoned that an increase in CAISO actions regarding economic outages that require generators to offer capacity did not demonstrate any reliability concerns. With regard to other regional transmission organizations and independent system operators, FERC noted that it has consistently rejected a one-size-fits-all approach to resource adequacy because each region has significant differences that must be accounted for and there can be more than one just and reasonable rate. Instead, FERC expressed confidence that upcoming CAISO and California Public Utilities Commission proceedings would appropriately address the changing grid conditions in California.

In June 2016, FERC first accepted proposed tariff revisions from CAISO in response to a large natural gas leak that occurred at Aliso Canyon in October 2015 (see December 6, 2017 edition of the WER). The tariff revisions established market measures, on an interim basis, to address the reliability and system operational risks presented by the Aliso Canyon event. In November 2016, FERC accepted CAISO’s proposal to extend the provisions for an additional year. In November 2017, while FERC once again accepted CAISO’s proposal to extend the same provisions for another year, it denied CAISO’s proposal to make certain provisions permanent. However, FERC did clarify in that same order in 2017 that rejection of the permanent tariff provisions would not foreclose CAISO from proposing to extend the tariff provisions for an additional year.

In its order, FERC accepted in part and rejected in part CAISO’s proposed tariff revisions. With one exception, FERC temporarily extended all of the the tariff provisions as proposed, each of which are now set to expire on December 31, 2019. FERC extended these provisions after concluding that these provisions remain a just and reasonable approach to continuing to ensure that CAISO has the measures and tools it needs to address risks associated with the limited operability of Aliso Canyon. However, FERC rejected CAISO’s request to extend the tariff revisions related to the gas price scalars. According to a report by the CAISO Department of Market Monitoring, CAISO’s use of the gas price scalars over the past year were not only ineffective, but also affected the market by weakening market power mitigation, increasing bid cost recovery, and imposing costs on consumers. FERC found this report persuasive and concluded that the proposed extension would not be just and reasonable.

]]>FERC Issues NOPR Implementing Changes to FPA Section 203https://www.troutmansandersenergyreport.com/2018/11/ferc-issues-nopr-implementing-changes-fpa-section-203/
Tue, 20 Nov 2018 23:56:25 +0000https://www.troutmansandersenergyreport.com/?p=10401On November 15, 2018, FERC issued a Notice of Proposed Rulemaking (“NOPR”) to implement Public Law No. 115-247, which amended section 203 of the Federal Power Act (“FPA”) to clarify that FERC authorization is only required for mergers or consolidations valued at more than $10 million. In addition, in accordance with the new law’s requirements, FERC proposes that transactions that are valued at $10 million or less, but more than $1 million, would only be subject to a notification requirement.

Prior to Public Law No. 115-247, FERC interpreted FPA section 203(a)(1)(B) to require public utilities to apply for FERC’s authorization prior to any merger or consolidation of jurisdictional facilities, even if the value of the transaction was nominal. On September 28, 2018, President Trump signed Public Law No. 115-247 into law (see October 9, 2018 edition of the WER). The primary effect of the law is to establish a $10 million threshold for public utilities seeking to merge or consolidate their facilities under FPA section 203(a)(1)(B). This essentially means that parties to transactions with a value of more than $10 million will necessarily have to seek approval from FERC before consummating the transaction. The law also establishes a notification requirement whereby public utilities that are parties to transactions that are valued at $10 million or less, but greater than $1 million, will merely have to inform FERC of such a transaction within 30 days after the transaction has closed.

In the NOPR, FERC proposes to amend Part 33 of its regulations to establish a $10 million threshold for public utilities seeking authority to merge or consolidate FERC-jurisdictional facilities. In addition, FERC proposes to require public utilities to notify FERC of mergers or consolidations that are valued at $10 million or less, but more than $1 million, within 30 days of the consummation of the transaction. FERC proposes that such notifications should include narrative information about the transaction, such as the consideration for the transaction and the effect of the transaction on the ownership of certain jurisdictional facilities. FERC states that the notification requirement would be useful in “collect[ing] information about the transaction should a question arise related to the underlying facilities and the Commission’s oversight under the [FPA].”

Comments on FERC’s NOPR are due 30 days after publication in the Federal Register.

On October 23, 2018, President Trump signed the AWIA, after the U.S. Senate passed the AWIA on October 10, 2018 (see October 16, 2018 edition of the WER). The AWIA amends Part 1 of the Federal Power Act as it pertains to preliminary permits, qualifying conduit hydropower facilities, and hydropower licenses in order to promote hydropower development. The AWIA also requires the Commission to: (1) initiate two rulemaking processes, within 180 days of enactment of the AIWA, establishing expedited licensing processes to issue and amend licenses for qualifying facilities at existing nonpowered dams and for closed-loop pumped storage projects; (2) collaborate with the Secretary of the Army, the Secretary of the Interior, and the Secretary of Agriculture, to develop a list of non-powered Federal dams with potential for non-Federal hydropower development, within 12 months after enactment of the AWIA; and (3) hold a workshop within six months of enactment of the AWIA to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, and issue guidance within one year of enactment of the AWIA to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites.

In order to fulfill its obligations under the AWIA, FERC established three dockets: (1) RM19-6-000 (Licensing Regulations under America’s Water Infrastructure Act of 2018); AD19-7-000 (Nonpowered Dams List); and AD19-8-000 (Closed-loop Pumped Storage Projects at Abandoned Mines Guidance). In addition, FERC established a schedule with abbreviated deadlines to ensure it meets the AWIA’s 180-day deadlines. The deadlines are as follows:

November 29, 2018

Deadline for federal and state agencies and Indian tribes to file a statement requesting participation on the interagency task force (“ITF”)

December 12, 2018

FERC staff will hold coordination session for the ITF to discuss proposals for the expedited licensing processes

January/February 2019

FERC staff will issue a Notice of Proposed Rulemaking (“NOPR”) for the expedited licensing processes

]]>FERC Nominee Bernard McNamee Testifies Before Senate Committee on Energy & Natural Resourceshttps://www.troutmansandersenergyreport.com/2018/11/ferc-nominee-bernard-mcnamee-testifies-senate-committee-energy-natural-resources/
Tue, 20 Nov 2018 22:23:27 +0000https://www.troutmansandersenergyreport.com/?p=10396On November 15, 2018, Bernard L. McNamee, who has been nominated to fill the vacancy left by former FERC Commissioner Robert Powelson, testified before the Senate Committee on Energy and Natural Resources (“Committee”). Currently, Mr. McNamee heads the Department of Energy’s (“DOE”) Office of Policy.

Mr. McNamee’s hearing mainly focused on whether he could be impartial regarding the DOE’s rulemaking process regarding grid resiliency and compensation for coal and nuclear power plants (see January 17, 2018 edition of the WER), given his role at DOE in that proceeding. At the outset of the hearing, Senator Lisa Murkowski of Alaska remarked that though Mr. McNamee already serves in a policymaking position at DOE, she stated to Mr. McNamee during closed door meetings before the hearing that FERC is an independent agency and should remain so. Mr. McNamee told members of the Committee that he would be able to maintain his impartiality, even though he was tasked with facilitating the DOE’s approach to grid resiliency and compensating fuel-secure generation units.

Senator Ron Wyden of Oregon also questioned Mr. McNamee’s ability to be impartial, should his nomination be approved, and stated that nominating Mr. McNamee was akin to “putting the fox inside the chicken coop.” Mr. McNamee noted in response that “ultimately [it] is whether I would be an independent arbiter and be able to look at the facts and the law and make an independent choice. I have no doubt that I can do that and that it won’t be influenced by politics.” McNamee also maintained at the hearing that FERC’s role in the regulated industry is to be resource-neutral and not to pick and choose which resources carry more weight.

However, when asked if he would commit to recusing himself from any future FERC proceeding to compensate coal or nuclear generating units, Mr. McNamee declined to do so, stating instead that he would consult with an agency ethics attorney.

Mr. McNamee is still awaiting a Committee vote to advance his nomination to the full Senate, where members will decide whether to confirm him for the position.

Mr. McNamee’s opening statement to the Committee can be found here, and an archive video of the hearing can be found here.

The EPA proposed the ACE Rule as a replacement to the EPA’s first GHG reduction rule, the Clean Power Plan (“CPP”). The EPA proposed to repeal the CPP on October 16, 2017, on the grounds that the CPP exceeded its legal authority. The EPA has stated that it intends for the proposed ACE Rule to correct the legal flaws present in the CPP, namely the balance between federal and state responsibilities in the CPP implementation. Chairman Chatterjee submitted the October 31 Comments to provide his feedback, as FERC’s Chairman, on the ACE Rule.

Prior to the adoption of the CPP on August 3, 2015, FERC staff held four public technical conferences to assess impacts of the CPP from the perspectives of various stakeholders (i.e., state utility commissions, regulated entities, and public interest organizations). After the CPP was adopted, FERC Staff prepared a White Paper on Guidance Principles for Clean Power Plan Modeling in AD16-14 to assist transmission planning entities in analyzing the CPP and associated compliance plans. FERC halted any further contribution on implementation of the CPP, however, after the CPP was held in abeyance by the U.S. Supreme Court in February 2016. In his October 31 Comments, Chairman Chatterjee addressed the proposal to repeal the CPP and, in doing so, stated that he was offering the EPA the benefit of the information FERC had previously gathered from its assessment of the CPP. Chairman Chatterjee stated that while FERC staff has not conducted a full analysis of the ACE Rule’s impact on the bulk-power system, the ACE Rule appears to correct some of the CPP deficiencies, including those pertaining to grid reliability. Chairman Chatterjee also addressed several concerns with the CPP as originally proposed, in the event that it is implemented in the future. First, Chairman Chatterjee addressed significant changes in the power sector occurring since the CPP’s adoption in 2015 that may cause unintended consequences if the CPP were implemented. According to the Department of Energy’s (“DOE”) Staff Report on Electricity Markets and Reliability, there have been significant retirements of baseload coal and nuclear units since 2010 due to low natural gas prices, wholesale competition, low customer demand growth, regulation-driven cost increases, and the growth of renewable resources. Chairman Chatterjee advised the EPA that these consequences may be unintentionally exacerbated should the CPP be implemented. Second, Chairman Chatterjee discussed FERC’s rulemaking proceeding in which it is evaluating the resilience of the bulk-power system, independent of the EPA’s and DOE’s own evaluations. Chairman Chatterjee explained that the purpose of FERC’s proceeding, initiated in 2018, is to examine electric grid resiliency and the effect of state subsidies on the long-term viability of generation capacity markets, which involve complex and difficult issues that may be challenged by the CPP. Finally, Chairman Chatterjee argued that the CPP as originally proposed may cause the EPA to deviate from its clear delegated authority under the Clean Air Act in a manner that would affect FERC’s exercise of its statutory authority under the Federal Power Act.

Chairman Chatterjee clarified that he was offering his comments as FERC’s Chairman, and not as a reflection of FERC’s views. A copy of Chairman Chatterjee’s comments is available here. The text of the ACE Rule is available here.

]]>Wind Developers File Complaint Against SPP Exit Fee for IPPs, non-TOs, and non-LSEshttps://www.troutmansandersenergyreport.com/2018/11/wind-developers-file-complaint-spp-exit-fee-ipps-non-tos-non-lses/
Mon, 12 Nov 2018 15:18:55 +0000https://www.troutmansandersenergyreport.com/?p=10373On November 5, 2018, the American Wind Energy Association and the Wind Coalition (together, the “Wind Developers”) filed a complaint against Southwest Power Pool, Inc. (“SPP”) regarding SPP’s Bylaws and Membership Agreement. Specifically, the Wind Developers object to the sections of the Bylaws and Membership Agreement which impose financial obligations (“exit fees”) on independent power producers (“IPPs”), other comparable non-transmission owners (“non-TOs”), and non-load-serving entities (“non-LSEs”). The Wind Developers argue that the exit fee violates cost causation principles, may pose a barrier to entry into SPP to vote on critical issues, directly affects jurisdictional rates, and that therefore, the exit fee is unjust, unreasonable, and unduly discriminatory.

SPP’s Bylaws and Membership Agreement provide for members to forfeit an exit fee if they seek to withdraw from membership in SPP. Section 8.7 of SPP’s Bylaws states that withdrawing members must pay for SPP’s immediate or long-term costs, including “debts under all mortgages [and] loans,” “all payment obligations under…leases,” and “employee pension funds.” Section 4.2.1 of SPP’s Membership Agreement obligates withdrawing members to submit a withdrawal deposit of at most $150,000, and provides that SPP “will not accept a notice of intent to withdraw without a withdrawal deposit.” The Membership Agreement also makes clear that SPP will not accept the deposit as being a full fulfillment of SPP’s costs to formally withdraw a member from the organization. Although the exact fee is not known prior to withdrawal, the fee could range from $700,000 to $1 million.

In the complaint, the Wind Developers argue that the exit fee violates FERC’s fundamental cost causation principle. Under the cost causation principle, FERC must ensure that a company recovers its costs from the entities that cause the company to incur those costs. The Wind Developers argue that the exit fee is used to underwrite a situation where a future member would seek to join SPP and would be used to satisfy future costs from which the withdrawing member would not benefit. The Wind Developers contend that the exit fee is for costs that “are unrelated to the exiting member,” and members should not be responsible to “carry the risk and liability for costs that they are not responsible for causing in the SPP market.”

The Wind Developers also claim that the exit fee could directly affect jurisdictional rates because it erects barriers to entry into SPP. The Wind Developers state that the ratio of IPPs/non-TOs/non-LSEs to full TOs and LSEs is extremely low as compared to other organizations, which leads SPP to be less reflective of the full interests of all market participants. The Wind Developers maintain that because there are more TOs and LSEs within SPP, the TOs and LSEs can dominate when SPP’s policies come up for a vote. The Wind Developers further argue that IPPs, non-TOs, and non-LSEs currently do not have a “reasonable opportunity to develop, vote on, and determinate SPP’s…rates, terms, and conditions of service.” The Wind Developers therefore argue that this problem impinges on SPP’s decision-making process to produce rates that are just and reasonable.

The Wind Developers request FERC to find that the membership exit fees, as applied to IPPs, non-TOs, and non-LSEs, are unjust and unreasonable, and to require SPP to adopt revisions to Sections 8.7 of its Bylaws and 4.2.1 of its Membership Agreement. Answers to and comments on the complaint are due by 5pm on November 26, 2018.